The Rich Man’s Burden And How Andrew Carnegie Unloaded It

PrintPrintEmailEmail

By 1909 it was quite apparent to anyone interested in higher education that the Carnegie Foundation had become the national unofficial accrediting agency for colleges and universities. Good teachers were accepting positions on the basis of whether or not the school was a participant in the pension fund, prospective donors used participation as a major criterion in determining the direction and size of their gifts, and the program even had an indirect effect upon admissions.

It is not surprising that schools like Northwestern and Brown should be concerned over exclusion. No president was more importunate in his demands that his faculty be included within the pension plan than was President Abram Harris of Northwestern. He even persuaded the President of the United States to come to his aid. “Northwestern is no more sectarian than Princeton,” Theodore Roosevelt, with some heat, wrote Carnegie. But Northwestern would not change the provision in its charter that required a majority of its trustees to be Methodists, and not even T.R.’s big stick could force Carnegie and Pritchett to yield to sectarianism.

They did give in to the demands of the state institutions, however. In 1908 Carnegie agreed to permit state institutions, at the request of the state legislatures and governors, to participate in the pension program, and he added an additional five million dollars to the fund to accommodate these requests. This extension proved to be the undoing of the whole program. By 1915 it was apparent to the trustees that the free pension system could not be continued indefinitely. Two years later an independent legal reserve life-insurance company was created, chartered under the laws of New York State, and called the Teachers Insurance and Annuity Association of America. From 1918 on T.I.A.A. entered into contractual relationships with individual institutions of higher education and established life insurance and annuity programs for faculty and college administrators on a contributory basis. The free pension plan had proved to be infeasible within twelve years after its inauguration, but it was a noble and elevating experiment. Had a regular insurance system such as T.I.A.A. been adopted from the beginning in 1905, we should not have had the sorely needed evaluation of higher education that the Carnegie Fund trustees forced on the colleges and universities. The Times of London was quite correct in calling the foundation one of Carnegie’s most significant accomplishments “in the supremely difficult art of spending large sums of money in undertakings to be of permanent advantage to the public.”

By 1910 Carnegie was more than willing to agree with the Times as to how “supremely difficult” the art of spending was. He had given away $180,000,000 of his fortune, but he had almost the same amount still left in his possession. The capitalistic system at 5 per cent worked faster than he could. He told his good friend Elihu Root that it appeared that he would have to die in disgrace as a man of great wealth after all. Root had a simple solution. Why didn’t he set up a trust, transfer the bulk of his fortune to others for them to worry about, and then die happy in a state of grace?

And so it was done. Carnegie created the Carnegie Corporation of New York in November, 1911, and transferred to it the bulk of his remaining fortune, $125,000,000, “to promote the advancement and diffusion of knowledge among the people of the United States.” As United States Steel had been the supercorporation in industry, so the Carnegie Corporation of New York became the first supertrust in philanthropy.

“Now it is all settled,” Carnegie wrote his Scottish solicitor, John Ross, in February, 1913. For years the newspapers of New York had run a box score on the philanthropic gifts of Carnegie vs. Rockefeller. Now the New York Herald printed the final score: “Carnegie, $332 million; Rockefeller, $175 million.” It was no longer a contest. The public had lost interest, and so had Andrew Carnegie.